TMI Blog1963 (9) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... was the previous year for the assessment year 1942-43, the total sales of the assessee amounted to ₹ 19,22,107 and of that, the dispute between the assessee and the revenue is in respect of a sum of ₹ 6,04,588, relating to sales effected to buyers in British India. These amounts, which we shall hereafter refer as the disputed amounts, were remitted by British Indian buyers to the assessee by posting from British India cheques and hundis drawn on British Indian banks and shroffs and the cheques and hundis so posted were received by the assessee at Petlad and were sent by the assessee to British Indian banks for being credited to the accounts of the assessee with those banks. The assessee being a non-resident company, its liability to British Indian income-tax depended upon its receipt of income within British India. In the course of its assessment proceedings for the assessment years mentioned above, the assessee contended that its profits on the sales effected to British Indian buyers accrued and were received in Petlad where it received payment by the receipt of the cheques and hundis and that it was immaterial that the cheques and hundis were sent to British Indian ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by or on behalf of the assessee in British India. The Tribunal accordingly decided the appeal in favour of the revenue. It may be pointed out that, at no stage in the proceedings, including the appeal before the Tribunal, was it contended on behalf of the revenue that payments of the disputed amounts were made by British Indian buyers in circumstances constituting the post office the agent of the assessee for the purpose of receiving payments and that the cheques and hundis by which such payments were made were, therefore, received by the assessee not at Petlad but in British India, where they were posted by British Indian buyers. The only ground urged was that the cheques and hundis, though received by the assessee at Petlad, were cashed in British India by British Indian banks on behalf of the assessee and that the disputed amounts were, therefore, received by or on behalf of the assessee in British India and this ground was accepted by the Tribunal. The assessee thereafter applied to the Tribunal to state a case and refer to the High Court the question of law arising out of the order of the Tribunal. The application, it seems, was not heard for a period of about six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, and the first question is whether these cheques were received in Baroda or in the taxable territories. If the cheques were received in Baroda, then the further question that will have to be considered is whether they were received by post or by hand. If they were received by post, there is still a further question to be considered and that is whether the assessee expressly or impliedly requested the merchants to send these cheques by post to Baroda ; in other words, whether the assessee constituted the post office its agent for the sending of these cheques. If the cheques were sent by hand to Baroda, the Tribunal will also consider the machinery adopted by the merchants for sending these cheques by hand to Baroda, and the Tribunal will also give a finding whether the messenger who brought the cheques was the agent of the assessee or of the merchants, whether the cheques were sent by hand at the request of the assessee, and whether they were sent by a messenger of the merchants direct to Baroda or whether they were first sent to Ahmedabad and from Ahmedabad they were sent by some other agents to Baroda. The Tribunal will consider all these matters in the light of the recen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to sustain the finding of the Tribunal that there was an implied request by the assessee to British Indian buyers to remit the sale proceeds by sending cheques and hundis by post. That contention was also negatived by the High Court and, on the basis of the finding recorded by the Tribunal, the High Court answered the question against the assessee. The assessee thereupon carried the matter in appeal to the Supreme Court. The Supreme Court took the view that the High Court had no jurisdiction to direct the Tribunal to submit a supplemental statement of case after taking additional evidence and that the order of remand made by the High Court was, therefore, without jurisdiction. The Supreme Court, accordingly, allowed the appeal and remitted the matter to the High Court to give its decision on the question referred to it by the Tribunal as required under section 66(5). The Supreme Court expressed no opinion on the question whether the High Court should ask for a supplemental statement of case confined to the facts already on the record and observed that that was a matter which should be left to the High Court. The reference thereupon came back to this court and we are now called u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank which cleared the cheques through the clearing house in Bombay. The argument urged on behalf of the revenue was that the cheques were no doubt received by the assessee in Aundh but they were received conditionally, that is, subject to realization and no payment could, therefore, be said to have been received by the mere receipt of the cheques ; payment was received only when the cheques were cashed and since that happened in Bombay, the receipt of payment by the assessee was in British India. The Supreme Court negatived this argument and found on the facts that the cheques were received by the assessee from the Government of India in complete discharge of the claim for the price of the goods and that payment was, therefore, received by the assessee on the receipt of the cheques. The Supreme Court also said that, even if the facts were not sufficient to raise an implication that the cheques were accepted as unconditional payment and the cheques were taken by the assessee conditionally, the position was not different, for the cheques not having been dishonoured but having been cashed, the payment related back to the dates of the receipt of the cheques and in law the dates of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and the date of receipt of the money which it represents is the date of its receipt. It may be accepted by the creditor in full satisfaction of the debt or it may be accepted conditionally, i.e., subject to the condition subsequent that it shall be duly met and honoured on presentation, in which event, as soon as it is met and honoured, the payment related back to the date of its receipt. We cannot, therefore, assent to the proposition that there is any distinction in principle between the legal effect flowing from payment by cheque and the legal effect flowing from payment by hundi. We may also point out that in enunciating the principle on which it rested its decision in Ogale Glass Works case (Supra) the Supreme Court did not make any distinction between payment by cheque and payment by hundi. The principle it laid down was a principle applicable to payment by negotiable instrument and that principle must apply equally to payment by hundi as to payment by cheque. We may in this connection refer to the following observations of S.R. Das C.J., while delivering the judgment of the Supreme Court in that case, which clearly show that the principle formulated by the Supreme Court wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment by cheque and payment by hundi cannot, therefore, be accepted. It must, therefore, be held that payments received by the assessee whether by cheques or by hundi were received at the time when the cheques and hundis were delivered to the assessee and not when they were encashed and this, quite irrespective of the fact whether they were taken by the assessee as unconditional payment or as conditional payment. The question which, therefore, arises for consideration is whether the cheques and hundis were received by the assessee in Petlad or in British India. Now it is common ground that the cheques and hundis were posted by British Indian buyers in British India to the assessee at Petlad. The question, therefore, resolves itself into a narrow one, namely, whether the post office acted as an agent of the assessee or of British Indian buyers. If the post office acted as agent of the assessee, it is clear that as soon as the cheques and hundis were posted by British Indian buyers in British India, the title to the cheques and hundis passed to the assessee and the assessee received the cheques and hundis in British India. If, on the other hand, the post office was the agent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties in regard to the place of payment. There was also no express request by the assessee to British Indian buyers to remit the sale proceeds by sending cheques and hundis through post. The only argument advanced by the learned Advocate-General on behalf of the revenue was that from the facts and circumstances of the case there should be implied a request by the assessee to British Indian buyers to send the sale proceeds by means of cheques and hundis through post. The learned Advocate-General relied on two notes appearing at the foot of the statements submitted by the assessee. Both the notes were in the following terms and read as follows : No merchant ever paid any amount in cash to our employee or broker or any of our representative in British India. The whole amount is remitted by post to Petlad by the buyers. Relying on these notes the learned Advocate-General contended that these notes clearly showed that the entire sale proceeds were remitted to the assessee at Petlad by British Indian buyers by cheques and hundis sent through post and, from this course of conduct between the parties, a reasonable inference should be drawn that there was a request by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, the Tribunal did not admit it on record and it does not, therefore, form part of the record of the proceedings. But if this be so, it is difficult to see how the learned Advocate-General can rely upon the note appearing at the foot of this statement even as an admission on the part of the assessee. The note forms part of this statement as much as any other matters contained in it and if it cannot be looked at for the purpose of the other matters, equally it cannot be looked at for the purpose of the note. No reliance can, therefore, be placed by the learned Advocate-General on the note appearing at the foot of this statement. The second statement related to the assessment year 1942-43 and was filed before the Income-tax Officer. This statement gave a detailed analysis showing how various amounts are received by the assessee from British Indian buyers in respect of sales effected to them during calendar year 1941 and then contained at the foot the note which we have already reproduced. The learned Advocate General relied on this note for the purpose of showing that according to the assessee itself the entire sale proceeds were remitted by British Indian buyers by post t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 1895, certain goods to the defendants and on the same date an invoice was sent to the defendants under which the defendants were entitled to discount if the payment was made within fourteen days. On 24th December, 1895, the defendants posted a crossed cheque made payable to the plaintiff or his order and with the cheque was sent a form of receipt for signature by the plaintiff. The envelope containing the cheque was properly addressed to the plaintiff, but was not registered. There was no express request to send the cheque by post. The cheque was never received by the plaintiff but was cashed by a stranger on the strength of a forged endorsement of the plaintiff's signature. On an action to recover the price of the goods sold and delivered, the defendants contended that the posting of the cheque amounted in law to payment, and gave evidence that for about 20 years before this transaction payments for goods, as between the plaintiff and the defendants, were always made by cheques sent by post together with the form of receipt mentioned above. The learned trial judge held that the course of business showed that the parties had agreed that payment should be made by cheque, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian buyers for remitting sale proceeds by means of cheques and hundis through post, though, as held in Pennington's case (Supra), even if there was any such course of business, it could not have been sufficient to raise an implication that there was a request by the assessee to those British Indian buyers to remit the sale proceeds by sending cheques and hundis by post. We are, therefore, of the opinion that, on the facts and circumstances of the present case, it is not possible to imply any request from the assessee to British Indian buyers to remit the sale proceeds by cheques and hundis sent through post. The learned Advocate-General relied on the decision of the Supreme Court in the case of Shri Jagdish Mill s case (Supra) and contended before us that just as the Supreme Court held in that case that there was an implied request by the assessee to the Government of India to pay the amount due by sending cheques through post, so also in the present case we should hold that there was an implied request by the assessee to British Indian buyers to remit the sale proceeds by sending cheques and hundis through post. But we do not think the reliance placed by the learned Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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